Amazon a9 engineAmazon had 900 million visits Christmas 2014,  1.3 Christmas 2015, and have regularly cracked the 1 billion visitor mark every month this year (as of May 2016). Let that number sink in. That’s 3x the population of the United States. The giant of retail, Wal-Mart only has 240 million visits a month. Target? 140 million. Grainger (for you B2B manufacturers)? 7 million. And Amazon visitors are buying. Amazon holiday sales will likely be up 20-25% over Q4 last year. That’s a decade of double digit YoY holiday sales growth (in case anyone’s counting 🙂  And its not just the US – we see this growth in UK, Europe, and Canada.

What’s their secret?  They key for any manufacturer or publisher to understand, is that Amazon’s success IS NOT simply due to the products Amazon buys and sells online. That’s only one part of it.

They succeed because Amazon.com is really a system that pits 4 competing divisions against each other to drive overall sales – Amazon Supply, Amazon Merchant, Amazon Marketing Service, and the technology teams that optimize the content that’s produced.

While these 4 groups are all technically ‘part of Amazon’, they actively compete against each other in a way that creates an optimized experience for the customer. No single group has full control over the products sold or the final price.  A buyer can be undercut by a merchant, who can be stepped on by a marketing campaign from another brand.  And all three of these forces have to deal with the search and performance engine that heavily leverage performance based analytics to select “who” gets top results ranking and the coveted buy box.

The best way to illustrate this is to break down an actual Amazon search results page and define who’s in control. Search usage dominates Amazon buyer behavior with an estimated 90%+ of users searching during their visit.

If you break out a typical search results page you see how the 4 pieces interact and conflict.

  1. Search results delivered: What makes the top of the list is a based on the proprietary search model that’s managed by Amazon’s A9 search team. The system is heavily data centric and is not directly controlled by Amazon buyers, merchants, or marketing teams. Top results are typically the best sellers, however, the system regularly manipulates results to test overall close rates. What’s interesting to note is the close rate does not just measure the item, it can include the overall shopping cart and favors items that tend to attract ‘add-ons’ to the sale. Classic ‘search terms’ apply and manufacturers can add hidden terms (e.g. competitor brand names) to ensure proper placement.
  2. Product details shown: Product details are created by mixing Amazon supplier and third-party merchant content. Any partner can upload an image, change a description, or add features and it will be tested and implemented by the system. Any partner can create any SKU at any time (as long as it is not a restricted product) . This is an area that should be regularly reviewed by your team. If you don’t sell the item to Amazon you can bet someone else will do a listing for you. (link to quality report)
  3. Sponsored product listings: These are paid product ads available exclusively to third-party merchants. The third-party must own the buy box in order for the ad to run. This gives merchants the ability to get their products seen (and pay for a click). If an item does well, it begins to naturally move up the results, freeing up the space for the next paying tester.
  4. Categorization: This area is largely controlled by the Amazon supply group. They are responsible for creating all of the different groups and subgroups for every department. The supply side is also the primary populator of these categories, but does NOT have exclusive control. A third-party merchant can upload any item into a relevant category by adding the SKU. This is critical for items that cross multiple categories (e.g. many office, home, and health and beauty items should be in multiple categories).
  5. Brand ads: A relatively new addition, the brand ad box is controlled by Amazon marketing. Brand manufacturers can create specific brand or product campaigns selecting any group of keywords they like. In this example, York Nordic hiking poles show up as an alternative option for canes. This is an excellent option for a manufacturer with items that sell across different consumer groups.

Today, Amazon seems to be in everything from movies, to cloud, to drones. This ability to diversify is funded by a simple reality – online sales continue to grow exponentially. Over 70% of Amazon’s revenue comes directly form ecommerce sales, either direct or through third-party merchants that are forced to share a common platform that is designed to squeeze out the best result for the consumer, because the underlying technology is optimized to drive the best value to the front. The relatively new Marketing Services adds a new wrinkle to the mix—we’ll keep you posted on new developments.

Yeoman’s recommendation for manufacturers and publishers selling on Amazon remains the same: you must have a strategy and plan to actively manage supply, merchant, and marketing forces in order to optimize your results with the underlying technology engines.  succeed with them. Simply ‘selling to the buyer’ at Amazon is only one piece of the puzzle.  Contact us today to review your Amazon position!